Mining tax ‘drives investment away’

Australia’s reputation as a safe investment zone dived during the ferocious debate over the resource rent tax, according to an international survey by a right-wing Canadian think tank.

The survey by the Fraser Institute of 429 global mining executives found the ranking of Australian states on average fell to 31st of 51 jurisdictions, compared with 18th previously.

Separately, West Australian miners confirmed they are mulling a constitutional challenge to the minerals resource rent tax, which the Coalition has said it won’t introduce.

The Fraser Institute survey was conducted in June, before the resource super profits tax was scrapped in favour of the minerals resource rent tax, which only covers iron ore and coal.

South Australia is perceived to be the least risky Australian state in which to do business, at a global ranking of 15, behind several Canadian provinces, Botswana and Mexico.

The survey’s co-ordinator, Fred McMahon, said it was unclear how the mining industry would react to the new tax, given the structure was still uncertain.

“But the results of the survey make one point abundantly clear: governments that change mining policies in mid-stream without consulting the industry risk driving away investment," he said.

Resources Minister
Martin Ferguson
said tax was just one factor determining investment. Former BHP Billiton chief executive and
Jupiter Mines
chairman
Brian Gilbertson
said yesterday that the existing tax regime in Australia had served the country “very well for a long period of time". He said the current tax proposal was unclear and added to investment uncertainty.

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Mining magnate
Andrew Forrest
believes there are grounds to launch a constitutional challenge to the tax.

A
Fortescue Metals Group
spokesman suggested the company might support a High Court push. “FMG’s position is that it would appear that there are grounds for a constitutional challenge, but at this stage it is too early to make any commitment towards that," the spokesman said.

“However, if the WA government wanted to join in a challenge along with other mining companies, FMG would be prepared to look at that funding."

West Australian Premier
Colin Barnett
said this week the state government was likely to back any constitutional challenge to the tax by miners.

Mr Barnett said the tax could be open to challenge because there was a grey area between where state royalties and profits levied by the federal government interacted.

BC Iron managing director Mike Young, whose company has a joint venture with Fortescue, said that while any decision on legal action was a matter for the board, he would “in theory" back a challenge. “I have said from day one that the tax is unconstitutional," he said.

Atlas Iron
chief
David Flanagan
said he would support “any action" that redressed the uneven playing field that had been handed to the big miners by the government’s mining tax deal with BHP Billiton, Rio Tinto and Xstrata.

After addressing the Swan Chamber of Commerce in Perth, Mr Ferguson said he had been advised the tax was ­constitutional. “It comes as no surprise that some companies will continue to do all they can to avoid paying more tax on the record profits they make developing our non-renewable natural resources," he said.